M&E Daily

Smart Hollywood Summit: The OTT Battle Has Just Begun

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The battle for over-the-top (OTT) video engagement has only just begun and opportunities are abundant, but so are the challenges, according to industry experts.

Companies continue to jump into the OTT space and that’s clear pretty much “every day you open up the newspaper,” Steven Chester, senior consultant for ThinkAnalytics, said Feb. 27 while moderating the panel “Smart Screen Meets OTT” at the standing-room-only Smart Hollywood Summit.

There are 7.5 billion people on the planet now and “2.5 billion of them have a smartphone and the leader today in OTT” has only about 140 million subscribers, he noted. “So, clearly we’re looking at a huge market and that’s why a lot of companies are getting their toes into OTT,” he said.

With traditional network television, there was a “one-to-many relationship” between networks and content providers and that pretty much continued with cable TV “because you didn’t know who was watching television via the cable box” at any given time, he said. However, “today, you have a one-to-one” relationship thanks to OTT and “so now you start to understand what that consumer is doing – how they’re engaging” with the content, he said, underscoring one of the key appeals of OTT for service providers.

Asked if engagement is critical in the OTT space, Vanessa Fiola, a partner at OnPrem Solution Partners, said we have a subscription business model in OTT in which “it’s not just about acquisition … it’s about keeping the longevity and driving up the lifetime value of your end user… . So, absolutely, engagement is paramount to that.”

She predicted that the “engagement model of the future is going to look different” because young viewers who are members of Generation Z “process information differently than other people.” These viewers “take in many bits of information and can process” all of it better than older viewers, she said, adding that, as a result, “the way that we measure engagement and try to engage is, I think, going to be blown wide open in the next few years.”

She predicted there will continue to be growth in the ad-based video on demand (AVOD), subscription video on demand (SVOD) and transactional video on demand (TVOD) spaces. But she said: “I’m really excited about where AVOD is going” because that model attracts viewers with significantly higher annual income than other viewers and they don’t mind ads as long as they can get the content they want to watch.

At the same time, however, here’s no question that “TVOD is struggling and it needs to be reinvented” as a “hybrid” service offering because, without that, “people are turning away from” it, according to Craig Heiting, EVP of sales at Vubiquity.

Also critical today is to know what device people are watching content on at every moment because people tend to watch different content on their cellphones than on their 80-inch TVs, he said. So, “you have to know that” information to make sure “you’re giving them the right content that they want – especially young people,” he told attendees.

Ten years from now, we’ll also be looking into what kind of mood viewers were in while watching something and what kind of content would most fit that mood, he predicted.

Asked what challenges his customers are facing, Heiting said: “The first challenge is probably money,” drawing laughs from the audience. “Unless you’re Disney coming out with a new service, it’s tough to raise the money to get enough content that’s going to get some attention out there when you launch your service,” he said, adding: “We actually are agnostic to that. We will sell to everybody.”

But the OTT services that tend to be more successful, “if they’re smaller, are the ones that are” focusing on “more of a niche or more of a special audience at first, he pointed out. “Not everybody is going to be able to explode like a Disney onto the OTT front anymore,” he said, adding: “I see a lot of consolidation coming down the road” among OTT services.

Also, while “it’s a race to get as many customers” as OTT service providers can now, he cautioned: “At some point, they have to address people are hopping back and forth between these services just depending on what the new show is…. There’s got to be a way that these guys think about how to keep these customers sticking with them on a longer-term basis without locking them in just because they want to,” he said, calling it the equivalent of a “land grab right now.”

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